Stocks traded in a narrow range in this holiday-shortened week. Major stock indices around the globe hovered near record highs, as investors have reacted positively to a steady interest rate environment, a likely Brexit deal next month, and progress in U.S.-China trade. The expansion of balance sheets by central banks around the world has provided ample liquidity and support for risk assets such as stocks and corporate bonds. In their last meeting, the Federal Reserve held the short funds rate at the current level of 1.50%-1.75%, and indicated no changes for the foreseeable future. The yield curve has been stable and now has a positive slope, allaying concerns of recession. Mid-week levels for the 2-year and 10-year Treasuries were trading at 1.62% and 1.90% respectively.
Our economic recovery, now in year 11, continues to be driven by the consumer. Consumers have benefited from a low unemployment rate and rising wages, even as global uncertainty and trade tensions have provided a challenge to business investment. U.S. shoppers spent a record amount online during this year’s holiday shopping season, a report showed this week (source: Mastercard). E-commerce sales this year made up 14.6% of total retail and rose 18.8% from the 2018 period. Overall holiday retail sales, excluding autos, rose 3.4%.
Sources: Bloomberg, Reuters, Mastercard
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